Fleet Income Up 16%

Fleet Financial Group Inc. said Wednesday its fourth-quarter net income rose by 16 percent, and it plans to sell three businesses that do not fit into long-range plans to focus on the Northeast.

Boston-based Fleet said it also intends to buy back 20 million shares of its common stock over the next year, falling in with a trend among capital-rich banks. The shares are worth more than $1 billion at today's prices.

Analysts said Fleet's performance in the quarter reflected the benefits of recent acquisitions -- Shawmut and NatWest banks -- and a major overhaul of Fleet's balance sheet.

``With all the restructuring in 1996, earnings momentum in 1997 is going to be outstanding,'' said James E. Moynihan Jr., an analyst at Advest Inc. in Boston.

Net income for the quarter was $302 million, or $1.05 a share, compared with a net loss of $138 million, or $1.17 a share, a year earlier. Without special charges in the fourth-quarter in the previous year, net income would have been $260 million, or 94 cents a share.

Earnings per share in the most recent quarter were a couple cents shy of the $1.07 expected by a survey of 23 analysts by Zacks Investment Research Inc.

The quarter's results build on the base of credibility Fleet established on Wall Street in the third quarter when it delivered on performance promises.

``This company has been under a microscope because of promises made and not kept,'' said Frank Barkocy, an analyst at Josephthal, Lyon & Ross Inc. in New York. ``But the third quarter was a watershed.''

For the 1996 budget year, net income was $1.14 billion, or $3.95 a share, compared with earnings of $610 million, or $1.57 a share, in 1995. Without special charges, earnings would have been $1.04 billion, or $3.77 a share, in 1995. Analysts surveyed by Zacks had expected $3.98 for 1996.

Fee income was up a healthy 9.7 percent, and revenues rose 15 percent. But some analysts said loan growth remains a challenge in Fleet's Northeast market. Fleet also has had to fend off customer loss as it integrates acquired banks.

Credit quality slipped a bit, primarily because of the NatWest acquisition, and forced Fleet to set aside more money in the quarter to cover losses.

Analysts said the decision to sell the three business units were consistent with Fleet's strategic review of all its businesses. Fleet plans to sell its national mortgage business; a national auto lending unit that underwrites loans originated by auto dealers and its corporate trust business.

Eugene M. McQuade, Fleet's chief financial officer, said all three units were profitable but did not fit a stated focus of building its regional, consumer-lending business in the Northeast. The units also did not offer opportunities for cross-selling products to customers, he said.

Fleet's corporate trust business is among the 10 largest in the country. Last year, Fleet sold two units, including its troubled Atlanta-based consumer finance company, as part of the same review.

McQuade said Fleet's goal for 1997 is consistent and steady earnings growth.

On Wall Street, Fleet shares closed lower Wednesday at $51.62 1/2, off 62 1/2 cents in a mixed day for bank stocks on the New York Stock Exchange. Fleet stock rose 22 percent in 1996.

Return on common equity, a key profitability measure, was 17.67 percent in the fourth quarter, up from 15.45 percent the same period last year. Return on assets, another key measure, was 1.40 percent, compared with 1.24 percent.

A $100 investment in Fleet a year ago would be worth $134.51 today. The same investment in the Standard & Poor's index of major regional banks would be valued at $150.50.

As of Dec. 31, Fleet's assets were $85.5 billion, compared with $85.5 billion a year earlier. Loans and leases were $58.8 billion, up from $51.5 billion. Deposits were $67.1 billion, up from $57.1 billion.